Indiana’s main first-time-buyer assistance is offered through the Indiana Housing and Community Development Authority (IHCDA). First Step combines a 30-year FHA or conventional mortgage with 5% non-forgivable down-payment assistance (DPA). Eligible repeat buyers can use Next Home, which provides 2.50% or 3.50% non-forgivable DPA. Both forms of assistance are second mortgages that generally must be repaid when the first mortgage ends or the home stops being your primary residence.
Which Indiana homebuyer programs are available?
IHCDA mortgage programs are delivered through participating lenders in all 92 Indiana counties. Your best option depends on whether you are a first-time buyer, the loan type you qualify for, your county’s income and purchase-price limits, and whether you need cash assistance or simply a competitive interest rate.
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| Program | Who it serves | Mortgage and assistance | Important distinction |
|---|---|---|---|
| First Step | First-time buyers; targeted-area and qualified-military exceptions may apply | 30-year fixed FHA or conventional mortgage plus 5% non-forgivable DPA | Highest stated first-time-buyer DPA percentage, but the assistance is repayable |
| Step Down | Qualifying first-time buyers, with similar exceptions | Rate-focused purchase option; the current program page does not list DPA | Designed for a lower-rate strategy instead of cash assistance |
| Next Home | First-time and repeat buyers | 30-year fixed FHA or conventional mortgage plus 2.50% or 3.50% non-forgivable DPA | Broader eligibility; assistance is limited by the appraised value |
| Next Step | Existing IHCDA First Place, First Step or Step Down borrowers | Refinance program that may pair with a replacement DPA lien under guide rules | For refinancing, not a new home purchase |
The current IHCDA program listing identifies First Step as a first-time-homebuyer program with DPA, a 30-year fixed-rate mortgage, FHA or conventional financing, non-forgivable DPA and a $250 reservation fee. Program terms, rates and available funding can change, so confirm the live terms with an IHCDA participating lender before you make an offer.
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It is a second mortgage, not a grant
The February 2026 IHCDA Homebuyer Guide describes First Step’s 5% assistance and Next Home’s assistance of up to 3.50% as non-forgivable second mortgages. “Non-forgivable” means the balance does not disappear simply because you occupy the home for a certain number of years. The amount is secured by the property and has its own repayment terms.
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The second mortgage becomes due in full when the first mortgage is terminated or the property is no longer your primary residence. That can include a sale, payoff or refinance of the first mortgage, or moving out and converting the home to another use. Ask the lender for the exact note, lien and payoff provisions before closing.
Permitted uses
The guide says DPA may be applied to:
- Down payment
- Closing costs
- Prepaid items, such as taxes and insurance collected at closing
- Realtor compensation, where permitted by the transaction and program rules
DPA does not eliminate the need to qualify for the underlying mortgage. You still need acceptable credit, income documentation, assets where required, an eligible property and a debt-to-income ratio that meets the applicable underwriting rules.
Illustrative dollar amounts
Percentages are applied under the program’s calculation rules and may be constrained by the appraised value or other limits. As a simple illustration only, 5% of a $300,000 eligible base would be $15,000, while 3.50% would be $10,500 and 2.50% would be $7,500. Those figures are not a promise of the amount you will receive; your lender must calculate the actual assistance.
First Step: the principal first-time-buyer option
First Step is the IHCDA program most directly aimed at first-time buyers. It offers a 30-year fixed FHA or conventional mortgage and 5% non-forgivable DPA. The 2026 guide identifies that assistance as a second mortgage rather than a forgivable grant.
Who may qualify
Most buyers must meet the first-time-buyer requirement, generally meaning they have not owned and occupied a principal residence during the applicable lookback period under the program rules. The IHCDA FAQ also identifies exceptions for homes in targeted areas and for qualified veterans. Have the lender confirm whether your property and service history meet the exception definition; do not assume that any military service or any neighborhood qualifies automatically.
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Loan choices and fee
First Step can use FHA or conventional financing, subject to the selected loan’s underwriting requirements. The current IHCDA page lists a $250 reservation fee. Confirm whether and when that fee is collected, whether it is refundable, and how it is shown on your loan estimate.
Next Home: assistance for first-time and repeat buyers
Next Home is available to both first-time and repeat buyers who satisfy the program’s income, credit, debt-to-income, property and loan requirements. The current IHCDA page lists 2.50% and 3.50% DPA options; the February 2026 guide describes up to 3.50% non-forgivable DPA.
Appraisal limitation
Next Home assistance is limited by the appraised value. If the appraisal is lower than the contract price, the amount of available assistance may be reduced, and you may need additional cash or a renegotiated contract to close. Make the appraisal and financing contingencies in your purchase contract consistent with this risk.
When it may fit better than First Step
- You previously owned a home and therefore do not meet the ordinary first-time-buyer test.
- You want DPA but need the broader eligibility of a repeat-buyer program.
- Your lender determines that the 2.50% or 3.50% structure fits your loan amount and appraised value better than First Step.
Next Home still creates a repayable second-mortgage obligation. Compare the assistance amount with the interest rate, mortgage insurance, closing costs and future payoff requirement rather than choosing solely by the headline percentage.
Step Down and Next Step: different purposes
Step Down
Step Down is a purchase option for qualifying first-time buyers that emphasizes the interest rate. The current IHCDA page does not list DPA for this option. It can make sense when you have enough cash to close but want to evaluate a rate-focused structure instead of adding a second mortgage.
Next Step
Next Step is a refinance program for existing IHCDA First Place, First Step or Step Down borrowers. It is not a new-purchase assistance program. Under the guide’s rules, a replacement DPA lien may be possible in connection with the refinance. Ask the lender to explain whether your existing lien, payoff amount and proposed refinance meet those rules.
Indiana income, purchase-price and underwriting requirements
County income limits
IHCDA eligibility combines income, credit score and debt-to-income ratio, and the limits vary by county. The IHCDA limits page publishes tables effective May 25, 2026 for First Step, Step Down and Next Home FHA. It publishes separate tables for Next Home Conventional, Next Step Conventional and Next Step FHA.
Because household size, county and loan type can change the result, use the current table for the exact county and financing type rather than relying on a statewide number copied from an older article. Ask the lender how overtime, bonuses, self-employment income, child support, debts and non-borrowing household members are counted.
Acquisition limits
The purchase price must be below the federal acquisition limit for the area. The relevant limit can differ by county and program, so verify it before writing an offer. A home that is affordable under your monthly budget can still be ineligible if its acquisition price exceeds the applicable ceiling.
Credit and debt-to-income review
The IHCDA FAQ states that qualification depends on credit score and debt-to-income ratio as well as income. IHCDA establishes program rules, while the first-mortgage insurer or investor and the participating lender may impose additional underwriting requirements. Obtain a written prequalification that identifies the loan type, estimated assistance, maximum purchase price and conditions still outstanding.
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Property and occupancy rules
The home must satisfy the selected mortgage and IHCDA property rules, and it must be your primary residence. A targeted-area exception, veteran exception or repeat-buyer eligibility does not remove the need for an acceptable appraisal, title, insurance and occupancy certification.
How to apply: a practical sequence
- Check the live limits. Find your county and proposed loan type in the current IHCDA income and acquisition-limit tables. Record the household size used and the table’s effective date.
- Gather documents. Prepare recent pay stubs, W-2s or tax returns, bank statements, identification, employment history, debt statements and documentation for any other income. Your lender will specify the final list.
- Contact an IHCDA participating lender. The lender performs prequalification and official underwriting, confirms whether First Step, Next Home or another option fits, and reserves the program allocation when appropriate.
- Compare the structure, not just the DPA. Request side-by-side figures for the interest rate, monthly payment, mortgage insurance, cash to close, second-mortgage amount and payoff conditions.
- Confirm the property before offering. Verify county limits, acquisition-price eligibility, targeted-area or veteran exceptions, property type, appraisal requirements and primary-residence rules.
- Check funding and reservation status. Program availability and lender allocations can change. Confirm that the selected assistance is available for your projected closing date and ask about the $250 First Step reservation fee if applicable.
- Review the closing documents. Read the first-mortgage note, DPA note and lien documents. Make sure the assistance amount and repayment trigger match the terms you were quoted.
When USDA Section 502 Direct may be worth checking
Rural households with low or very low incomes should also examine the USDA Section 502 Direct Home Loan program. USDA describes the program as serving eligible rural areas and providing payment assistance that increases a household’s repayment ability. Eligibility is determined through USDA’s rural-area, income, property and underwriting rules, not through IHCDA.
USDA Section 502 Direct is a separate path, so ask whether your intended property is in an eligible rural area and whether your income falls within the applicable low- or very-low-income category. Compare its payment assistance and long-term obligations with an IHCDA first mortgage and second mortgage; do not assume the programs can be combined.
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Assuming DPA is free money
First Step and Next Home assistance is non-forgivable. Get a payoff illustration for a sale, refinance and move-out scenario before closing so you understand the lien’s effect on future equity.
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County tables and loan-type tables change. A number from a prior year or a different FHA/conventional table can produce the wrong eligibility answer. Use the table effective May 25, 2026 or the newer version available when you apply.
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Ignoring a low appraisal
Because Next Home assistance is limited by appraised value, a low appraisal can reduce DPA and increase your cash requirement. Keep an appraisal contingency and ask the lender to model the lower-value scenario.
Waiting until after making an offer
Reservation, underwriting and property-eligibility questions are easier to resolve before you are committed to a closing date. Obtain lender confirmation of the program, estimated assistance and funding status first.
Comparing only the percentage
A larger DPA percentage can come with a different rate, mortgage-insurance cost or repayment balance. Compare total cash to close, monthly payment, projected second-mortgage payoff and the circumstances that trigger repayment.
Questions to ask an IHCDA lender
- Am I being evaluated under First Step, Next Home, Step Down or another option, and why?
- Which current county income and acquisition-limit tables apply to my household and loan type?
- What is the exact DPA amount after the appraisal and loan calculation?
- What rate, mortgage insurance and monthly payment apply with and without DPA?
- When is the second mortgage due, and what balance will be owed if I sell or refinance?
- Does the property qualify for a targeted-area or qualified-veteran exception?
- What reservation fee, lender fees and cash-to-close amount should I budget?
- Is assistance reserved and funded for my expected closing date?
Bottom line for Indiana buyers
Start with the current IHCDA county tables and a participating lender. First Step is the clearest first-time-buyer route when 5% assistance is valuable and you accept a repayable second mortgage. Next Home expands eligibility to repeat buyers and offers 2.50% or 3.50% assistance, subject to the appraised-value limit. Step Down prioritizes the rate without DPA listed on the current page, while Next Step addresses refinancing for certain existing IHCDA borrowers. For rural low- or very-low-income households, add USDA Section 502 Direct to the eligibility check.
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